What actions require a real estate license?

All 50 states have licensing laws that require real estate agents to be licensed in each state, in order to conduct real estate transactions.

Real estate transactions involve consulting, showing properties, and/or assisting in other possible ways for compensation in real estate related services. It is very important that only licensed real estate professionals complete activities that require a real estate license. 

If an unlicensed individual does complete activities that require a license, they may be subject to fines and other consequences by the real estate commission. We will learn more about potential disciplinary action in the ethics and conduct lessons.

States require licensing because agents are involved with important matters regarding the welfare of individuals, companies, and the public. Agents and brokers are involved daily with contracts, and other important matters that need to be done accurately.

States have special procedures and rules that must be followed. Licensing allows states to educate, supervise and enforce these rules and procedures.

As a good rule of thumb to remember, someone most likely would need a real estate license in the case that they do a real estate service for another party in exchange for compensation.

Examples of when a license would be required:

• Bob agrees to let Agent A represent him in buying an apartment building after signing a buyer agency agreement.

• Apartment owner Mary gives Jared's Brokerage 5% commission for managing a property.

• ABC Corp. hires Agent B to lease a commercial building for a 6% commission.

Examples of when a license would NOT be required:

• John tells Bob that he saw a great house for sale down the road and joins him to go and see it.

• Apartment owner Mary gives Tenant James $500 per month for collecting rent and shoveling the snow in the winter time.

• Sally recommends to coworker Jerry that he buy a new house in her neighborhood.